Ask HN: Next round of financing

I own a brick and mortar business I started w 2 friends over a year ago. One partner and I put up equal amts of money to capitalize the business. I run operations and did all the legwork involved to start the business. The partner who put up money w me had limited involvement at the outset and has less involvement at present, since he has a career elsewhere. Partner 3 runs operations w me and was compensated w a small amt of equity.

We broke even in yr 1 and are on track to make a profit this year. We've done a great job of branding, PR, and customer service which huge in a brick and mortar business.

Recently, an investment group approached us. Investment is an attractive option bc it would allow us to corner the market in our city and expand outside of it at a faster rate. Growing "organically" w/o the help of investment is less attractive bc it is a linear process and the time horizon for expanding is further, running the risk of competition crowding us out of an already crowded market.

The group has proposed that they would buy the non-operating partner out of his shares and then capitalize us from there. This partner understands the attractiveness of investment and he also understands the potential stability and opportunity it would give me and my operating partner, but he's also expressed that he didn't invest in us to make a nominal sum of money a year later (even if it is 2-3x what he put in). Question 1, what is an equitable way to handle this situation?

Also, I have a realistic number of what our company is worth today, but I fear that if our non-operating partner were given his "fair share" for the company from that number and then we were flooded with the investment that the group is talking about, my other partner and I would be diluted to <5% collectively (barring any additional guarantees). If that were to happen, I would be fearful of losing control of the company. What sort of guarantees should we ask for? Red flags to look for?